Source: James Robb, Director, Livestock Marketing Information Center
The supply side of the supply-demand economic environment will continue to support cattle prices. U.S. calf crops have been shrinking in recent years; the 2012 crop is likely 800,000 to 850,000 smaller than 2011’s. And the 2013 calf crop will be even smaller. Besides the smaller calf crop, in the next few years two additional factors will contribute to lower-trending U.S. cattle slaughter: 1) smaller cattle imports; 2) increased hold-back of U.S. heifers and cows for breeding herds. The discussion below focuses on why U.S. cattle imports are expected to drop.
Over the last 20 years, annual U.S. imports of Mexican cattle averaged 1.07 million head. During that same timeframe, cattle from Canada averaged 1.06 million head per year. Most of those Mexican animals are “feeder cattle” (not slaughter ready animals or breeding stock) and, depending on the year, those animals go to grazing programs (e.g. Oklahoma wheat pasture) or directly to feedlots (mostly in Texas). Canadian producers sell all types of cattle to the U.S. with the bulk being either feeder cattle or slaughter ready animals sold to packers (steers, heifers, and cows).
Last year (2011), imports from Mexico totaled 1.43 million head, which was the largest since 1996 and about 200,000 head above 2010’s. The most severe drought in decades devastated Mexican pastures in 2011, just like in the Southern Plains of the U.S., forcing producers to sell animals early and liquidate herds. Further, the drought was expansive, causing animals from further south than normal in Mexico to move north.
For the 10 year period prior to the discovery of BSE in Canada (1993-2002), the U.S. purchased an average of 1.25 million head of Canadian cattle each year. During 2003 into 2005 U.S. imports dropped dramatically, but subsequently returned to more normal levels. The impact of smaller Canadian calf crops became rather apparent in 2011 when U.S. imports dropped to the lowest level since BSE and posted a one year decline of about 380,000 head.
Trends in 2012
So far this year even more Mexican feeder cattle have been imported than last year, due to continued severe drought in much of Mexico and high U.S. calf prices. Many of those animals have been spayed heifers and very lightweight steers. Year-to-date feeder cattle imports from Mexico are up about 7% or about 88,000 head above 2011’s, based on preliminary weekly data from USDA. If the trends so far this year persist, imports could be record large, but not by much because many recent weeks have shown large year-on-year declines.